By Alan Zibel
With the National Association of Realtors reporting that home prices rose in about half of U.S. metropolitan areas in the last three months of 2010, it’s easy to think that that the housing market is showing some signs of recovery. “Home sales clearly recovered in the latter part of 2010,” Lawrence Yun, the NAR’s ever-optimistic economist says in a statement.
But the proverbial grain of salt is in order, given many other sources report prices continue falling. The Journal recently reported that home values declined in all of the 28 major metropolitan areas tracked during the fourth quarter when compared to a year earlier, and repeat-sales indexes such as the S&P/Case Shiller index have shown that prices declined in October and November.
The Realtors are looking at a different measure, median prices, which show that prices for home resales rose in about half of the nation’s 152 metro areas during the October-December quarter. Prices rose in 78 cities, fell in 71 and were unchanged in three. The group says the national median price for single-family homes was $170,600 in the fourth quarter of 2010, up 0.2% from $170,300 a year earlier.
The Washington, DC, area gained 8.1%. There were decliners: Portland, Ore., came in down 3.8% and Seattle dipped 3.9%.
Data from Zillow, however, show bigger declines in those three markets. Washington fell 5.8%, Portland declined 12.1% and Seattle tumbled 11.9%.
Why the difference? When comparing the fourth quarter of 2010 to the prior-year period, the Realtors use median price, the point where half of sales fall above and half fall below. Last year’s data still include buyers tapping a tax credit of up to $8,000. Many of those sales were first-time buyers, who typically buy lower-priced houses. The expired credit isn’t in this year’s numbers, so median prices in some markets could be higher from a year ago because the more higher-priced sales were added to the “mix” of sales.
Most industry watchers agree that the housing market must endure more pain before it can fully recover. Lending standards are tight, preventing would-be buyers from inking deals. The foreclosure crisis, meanwhile, continues with no end in sight. Many economists and housing analysts expect home prices to fall an additional 5% to 10% before prices hit the long-awaited bottom later this year or early next year.
Dawn Wotapka and Nick Timiraos contributed to this article.
Real estate and real estate pricing is a very local business. As such, I believe that most of the mathematical modeling and attempts at mash-up computer tracking are inaccurate and useless. One needs to be in and completely know the local market to truly understand pricing trend. When I say local, I mean as local as five square miles in a particular area. Harvard Business School professors can’t and don’t care to know what’s happening at the local level. That apples equally to the NAR.
Someone at the WSJ really ought to do a lengthy analysis of Lawrence Yun’s and David Lereah’s incredibly irresponsible/profoundly damaging statements on the state of the housing markets over the past 7 years. I can’t think of a less credible organization.
@Charlie-that is a good one
Housing prices will lag for quite sometime yet. Could be another 2-3years yet. There are numerous factors involved like what @Kevin mentioned ie shadow inventory (foreclosures and pre foreclosures set to come to market) that will continue to drive prices down. But demand will slowly increase and the law of supply and demand will eventually turn the tide of prices in coming years. The funny thing about real estate is that if you occupy yourself and pay a mortgage you will most likely NEVER see a positive ROI on real estate. If you do the truth ROI calculation the only way to produce a +ROI is if housing appreciation is at a steady 7-8% YOY growth and you are in a 25%+tax bracket. It just beats the hell out of renting. Housing must decrease by 3% YOY to lose to a renter in ROI or should I say lack of ROI. So I agree with Steve, real estate is a long term buy especially if you are occupying but if you are an investor I would be buying a lot of it right now! Just my couple cents. http://lehighvalleyhomes.tv
Why would anyone, particularly in a market in flux, buy a residential property unless they had a 5 to 7 year horizon? Secondly, all real estate isn’t created equal. Location, location, location. Third, different sellers vary in motivation. Each deal is specific. With the Internet today, so much information is available on selling and sold pricing, getting to fair market value is relatively easy. Assuming you believe the market in your target area is reaching near the bottom, why try to time the absolute bottom? Buy what you enjoy, or what you can generate positive cash flow on if you intend to be a landlord, and then ride the market back up over time. Reports from Scottsdale, for example, suggest a rush of all cash buyers as money on the side line recognizes that the US economy will recover, and that all markets over correct in both directions. And if you don’t over stretch your budget ( and isn’t that the lesson from this meltdown?), buying an attractive property today (waterfront, anyone?) will result in a positive financial outcome years from now. After all, isn’t the common wisdom that no money should go into the stock market unless it has a 10 year horizon at least? Why is real estate different?
Realtors are just doing their job to get people off the fence which is admirable. But the numbers are all tainted by government borrower bailout programs and the looming shadow inventory. Once these two things among others have been exhausted, maybe we can see a flatline and than a gradual slow recovery or at least consistency. Right now, it’s up and down, up and down and artificial numbers.
http://www.californiarealestateloanshop.com